So much for the myth that federal regulators protect the little‐guy consumer from big business.
On Aug. 8, the Federal Communications Commission (FCC) approved a new rule that will raise the cost of purchasing a new TV set by as much as $250. The purpose of this FCC TV tax is to force American consumers to purchase a product they have refused to pay for voluntarily. This is a naked case of regulatory corporate welfare: putting the financial interests of industry lobbyists ahead of the consumer.
The new FCC regulation will require all new TV sets to come equipped with the capacity to carry digital broadcasts. Digital TV is the newest fad in TV engineering. It will allow TV sets to eventually receive DVD quality picture and sound. Currently the “digital tuners” to provide this new technology aren’t cheap. They can easily add between $200 and $300 to the cost of a TV set — which in some cases is more than the cost of the new TV itself. So this would be like the Transportation Department requiring car buyers to pay more for accessories than for the new car itself.
Broadcasters and some TV manufacturers who produce the tuners — Zenith, for example — are feverishly pushing the new regulation.
Michael Powell, the normally free‐market‐leaning FCC commissioner, is leaning toward approving the new law that would prohibit stores like Wal Mart and Circuit City from selling TVs without the tuner after 2006.
The FCC was, of course, created to safeguard consumer interests, but in this case the agency will mandate a new expensive technology, whether consumers want it or not. Most American households already have access to cable or satellite TV. These viewers have mostly shunned the digital TV fad. Requiring these consumers to buy tuners with their TVs makes as much sense as forcing McDonalds customers to buy the fries if they want the Big Mac; or Apple to sell computers with Intels inside, or even baseball card packs to come with a stick of gum.
We have here a multimillion‐dollar income transfer from the TV viewing public to the broadcasters, with Uncle Sam as the policeman and enforcer. Once again, the Bush administration — in this case, the usually sensible FCC Chairman Michael Powell — placing the special interest ahead of the national interest. In this case, the broadcasters’ rush for special favors from government are no different or less justified than the handouts to the steel industry, timber companies, and million‐dollar farmers.
The broadcasters disingenuously justify their federal protection racket by arguing that the economies of scale from mass purchases can lower costs to consumers. No doubt that’s true. But, of course, that argument could be made to justify government interference in every new business and industry. If the government would require people to buy lemonade from my son’s roadside stand, he can lower his costs and prices too. To listen to the sanctimonious “public interest” arguments of the broadcasters, one might think they were selling the polio vaccine, not a prettier picture on a TV screen.
The FCC’s case for this product mandate is weak in the extreme. There is no market failure here that needs to be redressed. In fact, history proves just the opposite. One of the hallmarks of the new high‐technology age is how rapidly consumer electronic innovations become available to the mass buying public. Today, through the magic of the free market, even low‐income households can afford color TV sets, cellular telephones, CD players, DVD players, microwave ovens, the Internet, personal computers, and on and on. The diffusion of these technologies in virtually every case, occurred without government aid.
If anything, government’s track record has been one of inhibiting the diffusion of exciting technologies. This has indisputably been the case in the area of broad‐band technology. Government telecom regulations in the 1990s have shrunk the incentive for phone companies to invest in the necessary cable infrastructure to bring high‐speed broad‐band service to tens of millions of homes and businesses that still lack access. Here government has contributed to the digital divide in America.
As for digital TV, this new technology will become widely adopted, not when the government decrees it to be so, but when the prices fall fast enough that Americans willingly purchase the product on their own. The FCC shouldn’t stand in the way of this new technology, but it shouldn’t mandate it either.
When the consumer is king, product quality improves and prices fall.
The FCC’s latest assault against consumer sovereignty should be overruled by Congress — and before the next station break.